ROYAL MARWAR HOSPITALITY PRIVATE LIMITED,MUMBAI vs. DCIT-CIRCLE 3(3)(1), MUMBAI

Per contra, the Ld. Departmental Representative submitted that the 6. Appellant had filed the revised return declaring additional capital gains income only after notice under Section 143(2) of the Act was issued. It was further submitted that the satisfaction for initiating penalty proceedings could be gathered from the assessment order. The Ld. Departmental Representative further submitted that the Appellant had failed to substantiate the explanation offered and therefore, the same was rejected by the Assessing Officer. Thus, the Assessing Officer was correct in levying penalty under Section 271(1)(c) of the Act. The Ld. Departmental Representative further placed reliance on the penalty order and order passed by the CIT(A) to support his case.

We have heard the rival submissions, perused the material on record 7. and considered the legal position. The full Bench of the Hon’ble Bombay High Court in the case Mohd. Farhan A Shaikh Vs. DCIT (supra) has held that a mere defect in the notice - not striking off the irrelevant matter, would vitiate the penalty proceedings. The relevant extract of the aforesaid judgment reads as under:

(Assessment Year: 2014-15) “Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice—not striking off the irrelevant matter—vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.” (Emphasis supplied) A perusal of the Assessment Order, dated 27/10/2016, passed under 8. Section 143(3) of the Act shows that in relation to initiation of the penalty proceedings Assessing Officer has, paragraph 5 of the Assessment Order, simply stated that „Hence, in my opinion, it is a fit case for initiation of proceedings under Section 271(1)(c) of the Act‟ without specifying whether penalty proceedings have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. Further, a perusal of the penalty notice, dated 27/10/2016, issued under Section 274 read with 271 of the Act placed before us shows that the aforesaid notice is in the nature of an omnibus show cause notice, issued without deleting or striking off the inapplicable part. Therefore, respectfully following the judgment of the Full Bench of the Hon'ble Bombay High Court in case of Mohammed Farhan A Shaikh vs DCIT (supra), we delete the penalty of INR 69,43,532/- levied under Section 271(1)(c) of the Act. Thus, (Assessment Year: 2014-15) Ground No. 1 raised by the Appellant is allowed. Other contentions raised by both the sides, having been rendered academic, do not require adjudication. Accordingly, Ground No. 2 & 3 raised by the Appellant are dismissed as being infructuous.

In result, the present appeal preferred by the Assessee is allowed. 9.

Order pronounced on 05.01.2024.